Wednesday, April 28, 2010

A guest post from my Dad who feels strongly feels that Britain has been too ready to accept Gordon Brown's excuses for the recession and the deficit crisis. He wrote this piece before Brown was overheard venting his ire at a (Labour) voter this morning after being all smiles to her face. But is there a connection between the two - is this a man who always has to find someone to blame? Here's the post. I agree with every word. And don't think his opinions are based on Tory bias - after a life in business his politics veer to the right but he has never been a Conservative party member or particularly vocal about politics in his life. he just feels frustrated, like I do, that Brown always seems to escape the blame for his ruinous decisions. If anyone wants to publish a defence of GB I will publish it of course.

Wake up Great Britain !

Gordon Brown has, almost single handedly , created the conditions that took the UK into a far, farworse recession than most other countries and certainly made the recession far deeper in the UK than it should ever have been.

Why did he do this ?

To make sure, as far as he was able, that he and the Labour Party were re-elected to government in the last two general elections.

How did he do this ?

He increased taxes massively, by stealth, expecting the majority of voters not to notice the seriousness of these increases, particularly the increase in taxes on pensions, which will not affect many voters for several years to come. He also allowed local councils to increase the council tax considerably in excess of inflation for many years in succession.

These measures enabled him to increase public sector expenditure, increase the number of public sector employees and increase public sector employee’s remuneration at far higher rates than inflation and at that which would have been prudent.

Result : many very happy voters in the public sector and it’s contractors and suppliers.

He allowed money supply to run out of control, at the same time he kept interest rates too low.

( EG. Interest rates after 40% tax were well below the rate of inflation, much of the time below the rates of inflation for standard rate tax payers too. ) Inflation was allowed to continue at well above the 2% per annum he set as the maximum that was sustainable. House prices soared, giving owner occupiers the ‘feel good’ factor of unexpected wealth and large sums of free equity in their properties. Freely available loans meant many owners borrowed against this free equity to buy their 4 x 4’s, larger cars, luxury cars, yachts and motor cruisers, as well their ‘dream holiday apartments’ in Spain etc.

Result : many more very happy voters.

Local authorities and banks, looking for better returns than the meagre interest rates available in the UK, looked to Iceland for better interest rates and the USA to buy ‘packages’ of loans and mortgages at higher rates of return. (Well, so they thought ).

Banks in the UK, with the seemingly unending supply of money that was available, made irresponsible loans to house buyers and the ‘buy to let’ brigade, fuelling the runaway and booming housing market.

This resulted in the feel good factor spreading to many more voters. That was until the bubble burst and many people’s lives collapsed around them. But that came after the last general election.

Gordon Brown mismanaged the UK economy in such a gigantic way, on such a scale as has never before happened.

When everything came tumbling down around him, he, cleverly, has blamed the world recession and all of the banks for their mismanagement.

Nothing was ever the fault of Gordon Brown. Was it Gordon Brown ( with George Bush ) and his policies that caused the world recession and the global banking crisis ?

Now Gordon Brown has borrowed more money ( from where has it all come ? ) than this country has ever contemplated doing since the second world war. He is still borrowing at an enormous rate and has no intention of stopping this for many years to come, only halving the rate of borrowing after four more years of racking up massive debts for the nation.

Interest rates for investors, including pensioners in particular, are abysmal, even non taxpayers are now seeing a return on investments that are a fraction of the rate of inflation. ( My granddaughter’s small investment account paid £12.81 interest two years ago, £8.68 last year and £0.44 last week, with more money in the account each year ). However, the cheap mortgages are a boon to many borrowers, who must think Gordon Brown is a marvel, for whom they must vote again !

These are just a few of Mr Brown’s disasters. He is still giving millions away to overseas ‘ causes ‘.

Pensioners of the UK are the biggest ‘silent’ losers in Mr Brown’s debacle.

He has caused greater debts for the country than all the banks put together.

So why has not Mr Brown resigned over the catastrophe he has caused for our country ?

It is time Britain woke up and realised the horrendous damage Gordon Brown has done to the country.

After this election, I believe any incoming new government will find a far worse financial situation than has been made public to date.

However if Mr Brown can succeed in pulling the wool over the electorate’s eyes for a few more days, and passing the buck to the banks and the rest of the world, it might be him who has to admit to the country, the extremely serious situation he has got us into.

Friday, April 23, 2010

Sitting down to devour a newspaper in peace and quiet (preferably while also devouring a drink and/or a tasty snack) is one of my favourite pastimes. But I don't do it as often as I used to. Partly it's due to having little kids who are apt to destroy both the peace and quiet and the newspapers, partly because newspapers are expensive in Spain (€5 for the Sunday Times) and partly due to a lack of time.

But I still get my newspaper fix online more or less daily. Consuming newspaper articles online is a very different experience from reading the inky version. I will immerse myself in the latter for as long as it takes to read from cover to cover; online news consumption is more a case of grazing - a quick glance at the sports stories at telegraph.co.uk over a coffee break or a financial update from FT.com - but my carefree flitting around the news websites might be coming to an end.

The Times and others are planning charges (£1 a day in the Times' case) because they have to to make ends meet. I can't say I blame them as it always struck me as absurd that an online viewer has access to the entire contents of a publication, plus the archives, for free when the poor old readers of the print version have to shell out every day. I used to buy the Economist (at least €4) quite a lot before I got used to just reading what I wanted online and saving the cash. I still feel guilty about that but its not for me to decide what newspapers and mags give away free.

The big question is of course will anyone pay for what they have been used to getting for free. I almost certainly won't. It wouldn't make sense for me to spend £1 for access to the timesonline for a day because I only read at most 2 -3 articles. I suppose if every newssite did the same it might make a difference but I think the publishers will struggle to make charges stick. This could be a threat to their very survival as I argue in my latest column for Alrroya.com:

Friday, April 16, 2010

How's this recovery thing working out for you? 2010 is supposed to be the year of recovery and maybe it is taking off in the rest of the world (China's growing too fast I read this week "China's GDP surges 11.9%"). But there's precious little sight of a recovery in Spain. The newspapers are still full of bad news stories, the property market is stalled and shops are still being boarded up. Even the weather, usually a consolation, has been letting us down.

What's stopping things getting back to normal or at least improving? Mostly I suppose it comes down the severity of the downturn that Spain suffered. As in Britain the housing boom and bust left a mountain of mortgages and personal debt as well as businesses used to a level of demand that simply wasn't sustainable. We badly need something to take the place of the housing boom but on a more sustainable basis; new enterprise to fill up the empty shops and premises, provide employment and get demand growing again.

But that needs new businesses starting small and hopefully growing and sparking a recovery. Unfortunately Spain's system of self-employment or "autonomo" is putting off a lot of people from even trying to begin a business and provide themselves (and others) with work.

We get a lot of enquiries from people who have an idea for a business but as soon as they hear what's involved with autonomo they are put off: the high minimum social security costs (you have to pay at least 250€ a month even with zero income), the need to charge VAT (there's no small business exemption) and the quarterly reporting and bureaucracy all put people off. The rules also seem to do everything possible to discourage small businesses - e.g. autonomo's don't get unemployment benefit and have lower tax allowances.

You start to realise why the number of people going autonomo has fallen for 23 months in sucession (see article) and why so many people go into business unofficially i.e. illegally without registering or paying tax. There must be millions of business plans that have been shelved or entered into "negro" (black economy). This is damaging in so many ways: potential business owners stay on the dole, they don't pay taxes on the "lost" business and there is no chance of them employing anyone themselves.

Reform is long overdue but there are a few good things about Autonomo and lots of people are giving it a go. There is even an exemption from those social security charges and some subisidies available. For details see our Autonomo guide.

Friday, April 9, 2010

When I first got interested in Spain and bought a holiday flat here (in Valencia) I never even thought about annual tax returns. Nobody told me about non resident tax returns and I didn't know to ask. I blithely went years without submitting a return until a few years ago when I had been a resident for a year or so and had some income to declare. I sold the Valencia flat in 2006 and there were no nasty consequences.

Some clients have not been so lucky. One had a nasty shock recently when they tried to recover the 3% capital gains tax retention taken by Agencia Tributaria when they sold an apartment in Spain. The amount of the retention was 3.000€ and despite making the proper claim for release of the money, the client was told that they had to produce tax returns for every year they had owned the property. It is possible to catch up taxes in these situations and do Form 210 returns in arrears and that is what they will have to do.

It is not just non-residents tax that can come back to bite you. Another case we are currently dealing with involves an autonomo who had been invoicing their clients for years without making quarterly or annual returns. Correcting this will be difficult as there are quarterly business tax and IVA returns to catch up and annual "renta" declarations. Worse of course there are penalties and interest payable on late returns.

The system is complicated and circumstances vary but this is the sort of extra expense that can be incurred:

late return penalty - less than 3 months late5% surcharge

less than 6 months late10% surcharge

less than 1 year late15% surcharge

more than a year20% surcharge

PLUS interest on amount owed - 5% in 2009 - for amounts paid more than 1 year late

If there is no tax to pay then the fine is a flat 100€

These are all assuming that the returns are made late by the taxpayer voluntarily(they have four years to do so), not because the citizen has been caught out by the Tax Office and ordered to pay tax. In this case the bill rises depending on the gravity of the offence uncovered:

Not serious: 50% extra payable on all interest and penalties

Serious: 100%

Very serious: 150%

The penalty for returns with no tax to pay rises to €200 if not made voluntarily.

Finally another consequence of not making Spanish tax declarations that can trap the unwary is that documentation gets lost. This makes it much harder to complete the returns and in particular difficult to claim any deductions that might have been allowed if things had been done on time.

If you have back tax issues or think you might have they are best tackled sooner rather than later however grim the prospect seems.

Most of the examples quoted in the article came from Britain and I concluded that the litany of shameful and sometimes horrific stories said more about Britain than Facebook. The story seems to be rumbling on. Witness this from the Telegraph today:

I then read a forum post from someone living in Spain and complaining about their area which as it happens is also mine (Manilva on the Costa del Sol).

"In the last year I have had dog sxxt placed in my garden (no I don't have a dog), I have had an ornament taken from the garden, I have had my handbag stolen and last night the passenger window of my car was smashed and about 3 euros in change taken. I need rminding why I'm here please."

While some of the many replies leapt to the defence of the area and the Coast generally, many seemed to echo the tone of the original post with complaints of burglary, car crime, rip-offs, untidiness and even "looky" men hassling you over dinner. While a lot of these complaints are not exactly anti-social behaviour - more general crime and also nuisances/irritations - it did make me re-examine my own attitudes.

I generally compare Spain very favourably with Britain when it comes to social behaviour. During my 8 years here I have never really seen sights I took for common in the UK (a) public drunkenness - wife excepted (joke) (b) hoodies / asbo kids hanging around menacingly (c) public slanging matches/scenes (d) wanton vandalism. There is property crime of course and maybe it's worse than the UK though I have never suffered any thefts or burglaries.

So I will stick by my contention that Spain is generally a more civilised place to live. Certainly looking at the papers and news out of the UK, there are some pretty vile things happening there on a daily basis. While it's true that the sensational cases don't represent reality for 99% of the population I still say they reflect something of the society as a whole or at least in certain quarters. For example there have been several incidents of disabled people being hounded by youths with their parents doing nothing (Channel 4 had a programme about this and there have been other cases ending in death tragically) ; anyone who says these are isolated incidents and say nothing about modern Britain are fooling themselves. Same goes for bullying, child neglect, racism and knife crime cases.

For the sake of balance though perhaps my view of Spain is overly generous because I don't follow the news here much. So as an experiment I had a quick trawl through the Spanish press for anti-social behaviour stories. I came up with a few crime stories like a missing girl (believed kidnapped) but nothing anti-social related. Finally I had a quick look at an English-language Spain portal and found this article:

After searching for 20 minutes for signs of anti-social behaviour I finally found it at an event organised in Salou for British students which featured copious quantities of alcohol, easy sex, accidents, disgusted locals and vomit on the streets. A very unscientific test I know, but I can't help but feel vindicated.